THE Congress of South African Trade Unions (Cosatu) plans to launch a "massive campaign" against the compulsory annuitisation of two thirds of provident fund savings on retirement, which will come into force on March 1.

The measure became law with the signing of the Taxation Laws Amendment Bill by President Jacob Zuma and its publication in the Government Gazette last week.

Its enactment has once again pitted the African National Congress (ANC)-led government against the federation, which warned on Wednesday that the government’s refusal to hear its objections to the law had weakened the alliance and would "complicate" Cosatu’s campaigning for the ANC in the local government elections.

Cosatu president Sdumo Dlamini said the federation would apply for permission to hold protests under Section 77 of the Labour Relations Act.

"Yes, it does affect the alliance. It talks to the levels of respect and the lack of consultation. We will have to address this issue sharply. This was one matter that was do-or-die for workers," he said.

Cosatu has traditionally been critical for ANC election campaigns, providing funds and its own well-organised members to help canvas votes.

While relations between it and the governing party have been strained lately, and the annuitisation law could deepen the rift, political analyst Somadoda Fikeni believes it is unlikely Cosatu will withdraw its election support for the ANC.

"The alliance partners tend to close ranks when elections are close," he said. It might be difficult, however, to energise disaffected rank-and-file union members behind the campaign.

Cosatu spokesman Sizwe Pamla said plans for the protest campaign, which was mandated by last year’s national congress, would be made at next month’s meeting of Cosatu’s central executive committee.

Currently, provident fund members can withdraw all their accumulated savings as a lump sum, enabling them to make large purchases.

But the government says this leads to the impoverishment of pensioners and their dependence on state pensions.

Treasury deputy director-general Ismail Momoniat pointed out on Wednesday that the new law would benefit workers with provident funds by extending tax deductions currently only enjoyed by pension fund members. This would mean a higher take-home pay for workers with taxable incomes.

He also noted that the compulsory annuitisation provision would only affect new savings and hence would only begin to have an effect on most low-and middle-income workers in about five years.

This was because savings accumulated before March 1 would not be subject to the measure, which would also only apply to savings above the R247,500 threshold. Those 55 years and older would also not be subject to the new provision unless they opted for it.

Mr Momoniat urged Cosatu to consider the benefits and to not create confusion by making misleading statements.

Treasury is planning a communication campaign to educate workers about the law.